Demystifying China's mobile advertising market

BII A former Yahoo and Amazon employee, and current marketing VP at mobile ad exchange Inneractive, has published an analysis of the Chinese mobile publishing and advertising market in TechCrunch. The article touches on the market's competitive landscape, the ambitions of local players, and the opportunities for international firms. In particular, the author highlights growing demand for Chinese publishers to monetize traffic overseas, creating a golden opportunity for Western ad tech firms to lend a helping hand.

China's online oligopoly. Baidu, Alibaba and Tencent, together referred to as BAT, account for 73% of the Chinese online ad market, according to an eMarketer analysis cited by TechCrunch. Baidu registered 667 million mobile users for its search engine in June, Alibaba mobile active users is at 427 million, and Tencent's WeChat and QQ apps have 806 million and 667 million users, respectively. Analogies may be drawn here between Facebook and Google's dominance in the US, although a choice between three parties always trumps a duopoly.

Eyes on the horizon. Chinese publishers are eager to expand beyond the mainland, partly because of the difficulty of competing against the BAT triumvirate, which retains the majority of user traffic there. Digital companies are therefore venturing overseas in search of riper opportunities. Southeast Asia accounts for most of Chinese publisher traffic, but companies are pushing harder for share in North American markets, where there are higher value users. CPM rates in western markets are typically 10 to 20 times higher than n Southeast Asia. This is driven by the lower spending per person in APAC, which is at $15 per capita, compared with $165 in the US and $95 in Europe.

Journey to the West. The search for high value users has caused some publishers to bypass their home market entirely, electing instead to launch in the US or Europe. Popular millennial app Musical.ly, which is partly-owned by Beijing-based Cheetah Mobile, was developed and launched in the US in 2015. Apus, an Android launcher for personalizing a mobile OS's UI/UX has more than 900 million downloads, 30% of which emanate from the US and Europe. Marketing products in the US also plays into recent migration flows. China was the leading country of origin among 1.2 million immigrants counted in the US in 2013, according to Migration Policy.

Utility apps over content. Chinese app publishers tend to focus on the utilities category - like Android launches, keyboard apps, memory and battery optimizers, and so on. This is a sensible strategy given the wide usage of these apps. Utility apps accounted for nine of the top 25 mobile apps in the US by unique visitors, according to the ComScore. Chinese developers have largely avoided releasing content-based apps in the US because of the language disadvantage, but are increasingly moving into this space, and into the gaming space too. For example, last year Tencent bought Riot Games, which publishes the popular League of Legends franchise.

A window for Westerners. Chinese publishers' aims to be present in the US and Europe creates an opportunity for international firms to support these ambitions. The relationship can be two-way, with foreign firms guiding a Chinese partner through Western markets, and a Chinese firm providing an anchor for a Western firm to establish itself in Greater China and APAC. More specifically, the article mentions that there are large opportunities for ad tech companies specializing in native, video, and customized programmatic environments across a network of vetted, private marketplaces. With that said, not all Western firms have fared favorably in China. To begin, the major platforms - including Google, Facebook and Twitter - are all blocked in the mainland. Meanwhile, China has been a sluggish market for advertising giant WPP, which posted negative year-on-year growth in the region when it announced its interim results last month.